Health insurance exchanges: Be ready to be overwhelmed

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Twenty-four states now have been approved to set up their own health insurance exchanges, just seven months before people can start to enroll. That leaves the federal government to run 26 exchanges according to its own rules. No one’s quite sure yet what they will look like, but it’s becoming increasingly clear that many of them, at least, will provide an overwhelming range of choices for millions of people who may never have had to choose health insurance before.

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1. They will offer lots of choices. The 2010 Affordable Care Act requires insurance companies selling policies on the exchanges to offer at least four levels of coverage: bronze, silver, gold and platinum. As the names imply, they go from bare-bones coverage to the full works.

This means they’ll be complicated.

Massachusetts is the only state with a full health exchange system up and running.

“Right now we have nine insurance carriers who offer plans on our site. We have 99 different plans from which people can choose,” says Stephanie Nichols, spokeswoman for the CommonwealthHealthConnector.

A quick look shows six different plans available for a “gold” plan for a family consisting of one adult aged 27 and child, with $500 annual deductible and no co-insurance — meaning the insurer pays the whole cost of treatment, minus a small co-pay. The six plans range in price from $762 a month up to $1,476 a month.

The website is designed to allow people to compare one plan to another, both in terms of cost and in terms of what each insurer offers, Nichols says. “You can put in the hospital that you would prefer to go to,” she said. Or you can search for particular drugs you take to see which insurer will pay for them.

Buyers also will have to fill out forms to determine whether they are eligible for a federal subsidy — something that is likely to take more than a few clicks on the computer.

2. They may offer far more coverage than you have now. The 2010 heath reform law requires insurers to meet a minimum standard of coverage. They all have to cover a package of what are called essential health benefits, which includes free preventive screening services for certain cancers, immunizations and maternity and birth control benefits; they can’t turn you away because you have have been sick before or are a certain age; they can’t charge you more if you are a woman, or from a certain ethnic group; and they can’t stop providing coverage just because you have become expensive.

“It is going to be real insurance,” says Linda Blumberg, a senior fellow at the Urban Institute. “In the vast majority of states now, carriers can turn you down flat. That’s going to be prohibited.”

So insurance provided on the exchanges is likely to provide far more coverage than what people can buy themselves on what’s called the non-group market.

“It is important for people to understand that the non-group market today is, essentially, dysfunctional in every state,” Blumberg says. “It’s (often) not real insurance because there are so many holes in it.”

Most Americans are covered by employer-sponsored insurance, or by government-provided insurance such as Medicare, Medicaid or the Children’s Health Insurance Program. Only a small percentage buy their own individual private coverage. “This is the place where people go when they don’t have other options,” Blumberg says. The exchanges are meant to fill in the gaps to allow more people to buy insurance — the Congressional Budget Office projects that 26 million people will buy health insurance on the exchanges by 2022.

Now, says Blumberg, the private, non-group health insurance market is dominated by younger, healthy people, because the insurers are free to turn away customers they fear will cost them more. “It’s almost impossible to get maternity coverage in the non-group market today,” Blumberg said. “People end up getting policies that don’t cover chemotherapy.”

She cites the case of a man in his 20s who found out he had an embolism in his brain — a potentially deadly bubble blocking a blood vessel. He needed emergency surgery, but had a cheap, bare-bones policy. “The hospital told him not to show up unless he had a check for $75,000, because his insurance policy wouldn’t say whether it would pay for the surgery,” she said.

3. This does, however, mean that some people who now have health insurance may end up paying more. “That benefit package is broader than what most people are buying today. While most people will get more comprehensive coverage, it’ll cost more,” says Robert Zirkelbach, spokesman for America’s Health Insurance Plans. “Even some people who are eligible for subsidies may have to pay more out of pocket for their premiums.”

And new taxes on health insurance will cost each family about $350 a year starting in 2016, Zirkelbach says, citing an analysis by the nonpartisan Joint Committee on Taxation, because the insurers are certain to pass along the expense to their customers.

The health insurance industry is also unhappy about limits on what’s called age rating. Currently health insurers typically charge a 60-year-old far more than they would change a 30-year-old. The health reform law limits this — insurers may only charge older people three times as much as they charge the youngest customers. “That means young people are going to pay more, just to cover older people,” Zirkelbach says.

Blumberg agrees this may happen, at least at first. But the Affordable Care Act never promised lower premiums. It aims to reduce costs overall by keeping Americans healthier in the first place, so they don’t wait until they have a dire health condition, such as a heart attack, to seek care. “Some people are going to end up paying more at the beginning and some people are going to end up spending less. But will have a more functional market,” she said.

And higher premiums will often be offset by lower out-of-pocket costs — insurance will have to pay for coverage that people currently often pay for themselves, and the two may balance one another out.

4. There’s no way to know now what a plan would cost you on an exchange. That’s because none are up and running yet. Health insurance costs vary by state, by age, by what coverage the policy offers, by whether a person smokes and by which providers and hospitals take part.

“The cheapest plan for you is not going to be the cheapest plan for me,” Nichols says. “All the carriers have different premium rates.”

Insurance companies will have to adjust their premiums based on how many people sign up. “There is broad agreement that for all these reforms to work you need broad participation,” Zirkelbach says.

“If the only people who take part are those who are older and who have high health care costs, then it is going to be unaffordable for everybody,” he added. “Young, healthy people need to join the insurance pool.”

The law is designed to encourage people to sign on, and it now allows older adults to carry their adult children until age 26 — a way to get people aged 18 to 26, who notoriously skip health insurance, into the insurance market. And there’s the controversial fine, now defined as a tax, for people who don’t get coverage. But Zirkelbach says it’s not clear whether people who consider themselves healthy and at low risk will buy insurance. “Will those people still decide to buy coverage, or pay a penalty that’s as low as $95 the first year?” he asked.

No one will know the answer to that until after open enrollment, the period when people can sign up for insurance, which starts in October.